I cancel every paper catalog that is mailed to me and send promotional mailings straight to the recycle bin without reviewing them. I also do a lot of my shopping and research via the Web and never purchase anything via a 1-800 number, so I naturally assumed that direct mail was on its last, dying breath. Well, apparently I’ve been wrong. According to David Klein, CEO and president of Macromark Inc., direct mail is still very much alive—especially in the dietary supplement and nutrition market. “Direct mail advertising for nutritionals is booming,” said Klein, whose company specializes in direct marketing and mailing list management for nutrition products. “Every year we do more and more business in this space.”

Klein said two trends are currently boosting the direct mail business for supplements: The increase in the number of companies that are bringing new supplement products to market and the swelling population of consumers who are over age 50 and still prefer to learn about health-related products via print. “Many supplements are targeted to older consumers, and this demographic is still direct mail responsive and not as Internet savvy,” said Klein, who estimated that the United States is home to 15 million to 25 million consumers who are primed to respond to nutrition-related direct mail pieces.

Performing particularly well in the direct marketing arena for supplements are solo direct mail pieces that provide in-depth science-based information on one supplement product, Klein said. Although such pieces can utilize a wide range of formats, each is created with similar goals: to educate consumers about a health product’s proven benefits and then motivate those consumers to pick up the phone and order the product via a 1-800 number. Of course, to be successful, a solo direct mail piece must reach the right consumers—which is where Macromark’s expertise comes in. “The quality of the mailing list is very important,” Klein said.

Macromark works with supplement companies ranging in size from $25,000 to $400 million in annual sales, Klein noted. Many of these companies use direct mail to market supplement products targeted toward conditions that are particularly important to older consumers, such as digestive, prostate, cognitive, vision, cardiovascular and sexual health.

Nutrition Business Journal’s next issue will focus on direct-to-consumer sales of dietary supplements and other nutrition products and include a Q&A with Macromark’s Klein, who provides additional advice on how to create and conduct successful direct marketing campaigns for nutrition-related products. You subscribe to the journal via the NBJ Website.

Related NBJ link:

2009 Direct-to-Consumer / Non-Retail Industry Sales Report

Top U.S. Supplement Companies in Mail Order, Telemarketing and DRTV Channels, 2005 - Chart 225

Understanding Infomercials: The Science of Direct-Response Advertising Campaigns in the Nutrition Industry

Related Functional Ingredients Magazine link:

Marketing Insights: Integrating the Message

The Federal Trade Commission (FTC) made an example out of infomercial pitchman Donald W. Barrett and his associates on August 13 when they were found guilty of taking advantage of customers by making false claims about and unauthorized charges for two dietary supplement products. The U.S. District Court for the District of Massachusetts ruled in favor of the FTC and ordered the marketers of Supreme Greens and Coral Calcium to pay a total of $68.6 million in fines because of false and misleading claims. The marketers used infomercials to make illegal claims that the products could cure conditions such as cancer, Parkinson’s disease and heart disease.

Direct Marketing Concepts Inc. and ITV Direct Inc., marketers of the Supreme Greens products, were both charged with making unsubstantiated claims. In addition, the companies were punished for making unauthorized credit and debit transactions through a deceptive continuity program that would periodically bill customers’ credit cards for additional product orders without their express consent. The court froze the assets of the companies and ordered them to pay $48.2 million to the customers they ripped off. The courts also ordered King Media Inc. and Triad ML Marketing Inc., marketers of the Coral Calcium products, to pay $20.4 million in consumer refunds.

The courts also explicitly ordered the companies not to misrepresent their products in the future, though Nutrition Business Journal suspects they are sufficiently motivated not to do so by the $68 million in fines. In addition, the companies were presented with a laundry list of offenses that they are barred from participating in, including: “Misrepresenting that scientific research validated their claims; making any health, performance, or efficacy claims about any food, drug, dietary supplement, cosmetic, or device unless such claims are true, non-misleading and substantiated by competent and reliable scientific evidence; failing to disclose that promotional programming is, in fact, a paid advertisement; and billing consumers or charging their credit or debit cards on an ongoing basis without their consent.”

In April, the FTC charged a group of Delaware-based supplement suppliers with making false and deceptive claims surrounding the sale of hoodia gordonii. NBJ offers a direct-to-consumer selling web seminar in which regulatory expert Ivan Wasserman, who is an attorney with Manatt, Phelps & Phillips, discusses the ramped up enforcement efforts by the FTC and what supplement marketers can expect out of the agency over the next year.

Related NBJ Links:

FDA Increases Enforcement Efforts, Warns Internet Marketers About Swine Flu Claims

Direct-to-Consumer Advertisers Must Overcome ‘Tremendous Distrust’ on the Hill

NAD Turns in SlimForce 7 to FDA, FTC for Unsubstantiated Advertising Claims

Related Functional Ingredients Magazine Links:

Deceptive Hoodia claims rile FTC

Network-marketing companies doing business in the nutrition industry have seen an increase in the recruitment of new distributors, though many of the top companies are reporting downward sales trends for 2008 and the first part of 2009. Companies have capitalized on people looking for new ways to save money or supplement their income in a down economy, but the distributor increases have not translated to higher sales numbers.

Herbalife, one of the largest network-marketing companies in the industry, reported a net sales decrease of 13.7% for the first quarter of 2009, citing unfavorable impact of currency fluctuations. Nu Skin would have posted a 4% revenue gain for the first quarter, but when factoring in foreign currency fluctuations, the company reported a 1% decline. USANA Health Sciences was no different, reporting a 4% decline in revenues for the first quarter and pointing to a strong U.S. dollar that negatively impacted the business. Scott Van Winkle, managing director of equity research with Canaccord Adams, noted that a large exposure to international markets has been particularly challenging for network marketers in the nutrition industry. “They have simply been walloped by the strength in the U.S. dollar. That has impaired earnings and sales right across the group. That’s been one of the most significant themes in the direct selling industry,” he told NBJ.

As companies work to offset the negative impact of currency fluctuations, many have rolled out new promotional programs to attract more distributors in an attempt to increase sales. Mannatech unveiled a program called the Economic Stimulus Plan (ESP) in February 2009, which created a compensation plan that allowed for a shortened selling curve and entry into the business without the accumulation of excess product. The company’s distributor base of approximately 530,000 increased as a result, according to CEO Wayne Badovinus.

Even after network-marketing companies bring in more distributors, it can often take between three and four months before they have any noticeable impact on the business. Dr. Tim Wood, vice president of research and development for USANA Health Sciences, noted the difficulty of trying to turn more distributors into more sales. “While our base of customers is growing, there is pressure to purchase fewer products every month. It’s a wallet-share deal. People feel the pinch and are going to spend a little less on supplements,” he explained.

Van Winkle told NBJ that the big dilemma network marketers are dealing with in this recession is: “Are there enough new distributors to offset lower sales per existing distributor?” Right now, the answer appears to be no. However, the outlook for direct selling may be more favorable than some retail environments. “The fact that there are more distributors is a counterbalancing effect, so the good news is that [the direct selling industry] is not counter cyclical, but it is less cyclical than other segments, assuming you’re selling the right products,” said Van Winkle. As it stands now, the decline in consumer spending has outpaced the ability of network-marketing companies to offset those declines with production from new distributors. However, nearly all network marketers are seeing an increase in interest from potential distributors, so it will be interesting to see if the influx of new sellers has a measurable effect on the sales growth of the major network-marketing companies in Q2 and Q3.

NBJ’s May issue, Direct Selling in the Nutrition Industry IX, will feature a complete breakdown of the MLM market in 2008, including supplement sales estimates and a feature story on raw material and ingredient supply to network marketers. The issue will also include market quantification and detailed analysis of all 2008 U.S. direct-to-consumer sales in the nutrition industry.

Related Links:

Herbalife Experiencing Stellar Sales Despite Slumping Economy

Mannatech Cuts U.S. Workforce by 15%

Stronger Dollar Weakens USANA’s Fourth-Quarter Sales

If you are a subscriber to Nutrition Business Journal, you can now access all of the 2008 Nutrition Industry Overview online at nutritionbusinessjournal.com. No need to sort through your over flowing mailbox, search your desk and interrogate your co-workers for your copy of NBJ. Just go to nutritionbusinessjournal.com.

To see all the articles, go to the current issue page. Here you will see the entire overview issue laid out in an expanded table of contents view. From here you can link to every article if you are signed in as an NBJ subscriber.

If you do not know your NBJ subscriber username and password, call Rachel Dederich, NBJ’s Subscriber Services Coordinator, at 303.998.9263.

-Patrick

Did you know that fully 13% of nutrition products and 36% of dietary supplements are sold through non-retail channels in the United States. This is real business that, if approached correctly, can jumpstart your supplement business sales.

Increasingly, nutrition industry entrepreneurs are turning to the direct channels to launch new businesses and products via the Internet, multi-level/direct marketers, practitioners, direct response television, direct response radio, mail order and catalogs.

I along with Nutrition Business Journal co-founder, Tom Aarts, will be leading this webseminar on Wednesday, June 25, 2008 - 11:00-12:30 pm MT. Register now!

Please join us as we cast light on the lesser-research, but incredibly important, direct channels of the U.S. nutrition industry….one of NBJ’s specialties!

-Patrick